CHS Inc Iberica Sl & Anor v Far East Marine SA (M/V "Devon")

A carrier is liable under the Hague Rules where the vessel is unseaworthy at the commencement of the voyage and that condition causes the loss. Causation may be established on the balance of probabilities from circumstantial evidence, including the timing and sequence of a casualty, expert evidence and the absence of evidence within the carrier’s control. The precise mechanism need not be identified where one explanation best fits the evidence. A carrier cannot rely on the Hague Rules exceptions where the relevant unseaworthiness resulted from a failure of due diligence. Reasonable segregation, investigation and disposal of damaged bulk cargo may constitute recoverable consequences of the breach, including where a competitive salvage sale is the practical means of mitigation.

The claimants owned corn carried from Varna to Tarragona on the defendant’s vessel. The vessel suffered a main-engine breakdown shortly after leaving Varna and arrived about 59 days late. Some of the cargo became caked, mouldy and otherwise substandard.

The claim alleged that the vessel was unseaworthy, that the defendant had failed to exercise due diligence under the Hague Rules, and that the contractual obligation to proceed with all convenient speed had been breached. The defendant disputed causation, the extent and value of the cargo damage, and the consequential expenses. The principal issues were whether the engine failure resulted from unseaworthiness, whether the Hague Rules defences applied, and what loss was recoverable.

1. Unseaworthiness and causation. The vessel was unseaworthy at the commencement of the voyage because the seawater cooling system was dirty and partially blocked, causing failure of the low-temperature fresh-water cooling system and excessive main-engine lubricating-oil temperatures. It was also unseaworthy because there was no adequate system for monitoring relevant temperatures and pressures. The conclusion was supported by the alarm sequence, the timing of the breakdown, expert evidence and the Owners’ failure to produce direct evidence or material documents concerning the casualty and repairs.
2. Causation was established on the balance of probabilities. The court was entitled to select the explanation which best fitted the evidence even though the precise blockage and mechanism could never be identified. The theory of a premature bearing failure or momentary interruption in lubrication was rejected as unrealistic. The explanation based on failure of the cooling system was preferred.
3. Due diligence and Hague Rules defences. The Owners had failed to exercise due diligence. The seawater suction strainers should have been inspected and cleaned at least within the planned maintenance interval and, in practice, at each port. No defence was available under Hague Rules art IV.1. Articles IV.2(p) and IV.2(q) could not assist because the unseaworthiness was not a latent defect undiscoverable by due diligence and the casualty did not arise without fault or neglect of the carrier’s servants.
4. Convenient speed. It was unnecessary to decide whether the contractual obligation to proceed with all convenient speed had separately been breached. The vessel had proceeded normally until the casualty, and the necessary repairs did not involve unreasonable delay. Where the vessel cannot proceed because of an earlier breach of the seaworthiness obligation, the same delay does not ordinarily create a separate breach of the convenient-speed obligation.
5. Cargo and loss. The segregation of damaged and suspect cargo was reasonable and necessary. Once separated into warehouses, blending with sound cargo was logistically difficult and excessively expensive. The salvage sale therefore reasonably established the value of the damaged cargo. The claim succeeded for the cargo diminution and for reasonable additional stevedoring, storage, survey, testing, salvage-sale and vessel-arrest costs, subject to agreement on interest and the form of order.